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Merilee Dannemann: A cautionary tale about earmarked funds

By Merilee Dannemann

Triple Spaced Again

Posted:
03/15/2014 09:03:20 AM MDT

"I'd like to explain to you about the Subsequent Injury Fund."

I used to joke that this sentence could clear a room. If you were the host of a party and your guests weren't getting the hint that it was time to leave, you could mention the Subsequent Injury Fund and they'd be gone like a shot. I actually did this more than once.

Even the name invites confusion. Subsequent to what? Injured when? No wonder hardly anybody paid attention.

The Subsequent Injury Fund has been gone since 1996. I tell the story now because it's a cautionary tale about earmarked funds. In case you didn't notice, a few major issues in the recent legislative session, such as the early childhood education proposal, involved earmarked funding.

The New Mexico Subsequent Injury Fund (SIF), like similar programs in many states, was a workers' compensation program, established to encourage employers to hire workers with physical disabilities. These programs were started after the Korean War to help injured veterans.

When a worker is injured at work, the employer's insurance pays the costs. Those costs are then reflected in the employer's future insurance premiums. With the SIF, if a previously injured worker was injured again at work, the costs would be divided between the employer's insurance and the SIF. The impact on the employer's insurance would be less.

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The SIF was funded by an assessment on insurance companies, so most employers weren't aware of it, although, indirectly, they were paying for it. New Mexico's SIF had weird rules that made it quite difficult to make a claim against the fund.

The fund was administered by the Insurance Department under the old Corporation Commission. The amount of money it contained was generally not disclosed to the public, under the justification that it was a trust fund and not taxpayer money. I heard gossip that the fund's chief function was providing legal work for a few attorneys who were friends of the commissioners.

In the early 1990s, the Americans with Disabilities Act created new rules for hiring workers with disabilities. The SIF and programs like it became obsolete. Talk began within the small workers' compensation community about terminating the program, raising the question of what to do with the money.

Voila! The late Sen. Eddie Lopez was a state finance wizard who knew where funds like this were buried. In 1995, the Chama Land and Cattle Company offered to sell its magnificent land holdings to the state, and Lopez introduced a bill to use the SIF to buy the land. We learned at last that the fund had more than $10 million.

For decades, no one speaking for the public had raised a single question about how the money was being spent, where it came from or how much there was. Suddenly a few of the people who should have been watch dogging this program all along woke up and started hollering, "By gum, that's our money, and you can't steal it for some land purchase!" For a few days we heard sputters of red-faced indignation.

One real kicker was that Lopez's bill would have terminated the SIF program but not the assessment on the insurance companies. It took a close reading of the bill to figure this out. The money flow would have continued, to be tapped by legislators for any purpose.

That bill didn't pass. The Chama purchase was funded another way. The following year the SIF was terminated and the money was dispersed into the general fund. Nobody asked for, and nobody provided, an accounting of how the money had been spent all those years. A year later, we amended the state Constitution to replace the Corporation Commission with the Public Regulation Commission.

We citizens are not terribly good at watching the money. That's one reason I worry about new proposals for earmarked funds.

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